from the and-for-how-long? dept

As smartphones and other mobile devices have gotten smarter and smarter, they've taken over more and more of most people's general computing needs, and the importance of the classic personal computer has waned. And so for some time the question has been: will the PC ever go away entirely? That's our topic this week as we try to figure out who really needs a PC these days, and when and if that will change.

from the forest-for-the-trees dept

For years ESPN has been the perfect personification of the cable and broadcast industry's almost-comic denial regarding cord cutting and market evolution. Long propped up by a system that forces consumers to buy massive bundles of largely-unwatched channels, ESPN has struggled with the rise of streaming alternatives and sleeker, "skinny" channel bundles. The sports network, which has lost 10 million viewers in just the last few years, has been trying to argue that these losses (which caused Disney stock to lose $22 billion in value in just two days at one point) are simply part of some kind of overblown, mass hallucination.

Surveys have shown that 56% of consumers would drop ESPN in a heartbeat if it meant a reduction in the $8 per subscriber the channel is believed to cost. But last year, ESPN exec John Skipper suggested that these departing customers weren't worth keeping anyway:

"People trading down to lighter cable packages. That impact hasn't leaked into ad revenue, nor has it leaked into ratings. The people who’ve traded down have tended to not be sports fans, and have tended to be older and less affluent. We still see people coming into pay TV. It remains the widest spread household service in the country after heat and electricity."

All is well! Nothing to see here! This narrative that cord cutters are somehow uneducated, too old, or otherwise not worth keeping (which isn't true) sits at the heart of cable and broadcast executive denial. And while execs like Skipper consistently insisted that everything was under control, former ESPN talent like Bill Simmons have noted that the cord cutting revolution came out of left field and surprised the hell out of the self-proclaimed worldwide leader in sports, which had spent years spending millions on SportsCenter set updates and licensing deals with nary a care in the world.

Instead of identifying market evolution and quickly adapting, ESPN did, instead, what any other legacy company would do. One, it began suing companies that tried to offer more innovative, disruptive cable TV packages that didn't include ESPN by default. Two, it began yelling at companies like Nielsen simply for showing company executives the truth: ESPN was losing subscribers at an alarming rate. In short, executives doubled down on bad behavior and denial, something fans had noticed for several years:

In a memo posted to the ESPN website, Skipper proclaimed the staff reductions were necessary to "manage change" (something Skipper has shown himself incapable of doing while somehow remaining employed):

"A necessary component of managing change involves constantly evaluating how we best utilize all of our resources, and that sometimes involves difficult decisions...Dynamic change demands an increased focus on versatility and value, and as a result, we have been engaged in the challenging process of determining the talent—anchors, analysts, reporters, writers and those who handle play-by-play—necessary to meet those demands. We will implement changes in our talent lineup this week. A limited number of other positions will also be affected and a handful of new jobs will be posted to fill various needs."

That's great and all, but purging your on-air talent won't magically make executives like Skipper less myopic and more flexible. After losing an estimated 10,000 viewers per day, ESPN recently stated it will finally offer a standalone streaming service. But that won't solve ESPN's woes either. I'm told many of Disney/ESPN's contracts with cable providers contain provisions that prohibit cable providers from offering channel bundles without ESPN -- unless ESPN offers a standalone streaming service. In other words, even if ESPN adapts, it opens the door to new skinny, sport-free bundles without ESPN -- accelerating subscriber declines.

None of this is pretty, and were I a betting man I'd wonder if Disney/ESPN doesn't get swallowed up completely by a company like Verizon sometime in the next year. At that point you'd have to wonder if ESPN execs, like John Skipper (you know, the ones actually responsible for the channel's monumental implosion) might actually face something vaguely-resembling accountability.

from the tell-me-why-we-are-doing-this-again? dept

As Techdirt noted back in January, it is astonishing that the TPP negotiations proceeded for years with almost no detailed analysis of whether they would be beneficial. It was only recently, after the text had been finalized, that a number of studies started to appear which explored the likely impact of TPP in some depth. Strikingly, everysingleone of them predicted almost no benefit for the US economy from the deal.

The situation for TPP is rather better than for the other big US trade negotiations currently underway, TAFTA/TTIP, where attempts to model its impact are thin on the ground. The same is true for CETA, the EU-Canada trade deal that was supposedly "finished" two years ago, and yet still hasn't been passed because of the text's deep problems, not least because of its corporate sovereignty provisions. Despite the fact that CETA may be quite close to final ratification -- although growing resistance to it in Europe may still stop it -- we have very few studies of what benefits it might bring. The main one is the official analysis that was used to kick off the talks (pdf) in the first place, published in 2008. Here's the key result:

The annual real income gain by the year 2014, compared to the baseline scenario, would be approximately €11.6 billion for the EU (representing 0.08 percent of EU GDP), and approximately €8.2 billion for Canada (representing 0.77 percent of Canadian GDP). Total EU exports to Canada go up by 24.3 percent or €17 billion by 2014 while Canadian bilateral exports to the EU go up by 20.6 percent or €8.6 billion by 2014.

Leaving aside the fact that 2014 has come and gone, it's clear even from these figures that CETA will produce almost negligible annual GDP uplift for both sides, since the quoted figures are cumulative extra growth that would come from CETA. But an important question is just how reliable even these small gains are, since they implicitly form the main justification for the whole deal. A new study from the Global Development And Environment Institute at Tufts University, which also conducted one for TPP last year, offers a useful perspective. Its results are pretty damning, and include the following:

CETA will lead to wage compression. By 2023, workers will have foregone average annual earnings increases of €1776 in Canada and between €316 and €1331 in the EU depending on the country. Countries with higher labor income shares and unemployment, such as France and Italy, will experience the most pronounced wage compression.

CETA will lead to net losses of government revenue. Competitive pressures exerted by CETA on governments by international investors and shrinking policy space for supporting domestic investment, production and investment will reduce government revenue and expenditure. Government deficits will also increase as a percentage of GDP in every EU country, pushing public finances closer or beyond the limits set by the Maastricht treaty.

CETA will lead to job losses. By 2023, about 230 thousand jobs will be lost in CETA countries, 200 thousand of them in the EU, and 80 thousand more in the rest of the world, adding to the rising dependency ratio (the average number of people supported by one job).

CETA will lead to net losses in terms of GDP. As investment and foreign demand remain sluggish, aggregate demand shortfalls nurtured by higher unemployment will also hurt productivity and cause cumulative welfare losses amounting to 0.96% and 0.49% of national income in Canada and the EU, respectively. While the United Kingdom (-0.23%) and Germany (-0.37%) may be least affected, France (-0.65%) and Italy (-0.78%) will lose more than other EU countries (-0.53%).

The full 40-page paper (PDF) goes into the details. Along the way, it provides a highly critical analysis of the underlying econometric model used for almost all of the official studies of CETA, TPP and TTIP -- the so-called "computable general equilibrium" (CGE) approach. In particular, the authors find that using the CGE model to analyze a potential trade deal effectively guarantees that there will be a positive outcome ("net welfare gains") because of its unrealistic assumptions:

In these CGE analyses, the Canadian and EU economies instantaneously and costlessly adjust to the trade reform, and as any increase in unemployment or loss of aggregate income, even temporarily, is ruled out beforehand, CGE analyses can only point to net welfare gains. Blinded by such strong but palpably unrealistic priors, neoclassical CGE modelers have merely defined away the problem. In light of such a lack of intellectual diversity and empirical realism, this paper contends that, already by their design, these studies do not represent a reliable basis for assessing CETA and meaningfully informing policy-makers.

Another new paper on CETA (pdf) points out a further issue with existing analyses of the economic impact: the fact that CETA -- like TTIP -- is mostly about regulatory convergence, rather than simple tariff reduction. And yet no account whatsoever is taken of the negative consequences of these moves in the official study or in those that follow its approach:

The additional burden on regulators from the various additional steps due to CETA -- and even more after its potential extension to other countries -- in the context of diminished regulators' resources, is likely to lead to delays, blockages and a reduction in the standard of regulation. Use of the precautionary principle is likely to be under great pressure in a number of areas. All of this is done in the name of economic gains which turns out in the official impact assessment to be vanishingly small -- the equivalent of a cup of coffee every three months for each European in terms of disposable income -- and if the omitted effects of constrained regulations in the areas of climate change, finance, toxic chemicals, etc., were included in a more thorough assessment, then the economic evaluation would turn out to be heavily negative. Locking such provisions into an international treaty would turn out to be the height of folly.

These two new studies offer valuable perspectives on CETA. It's a pity they weren't produced years ago, when more might have been done to mitigate the harmful effects they reveal. As it is, it seems the only option now is to reject CETA completely.

from the the-future-is-coming-fast dept

Chances are, I can name five tech devices that are in your home — or pocket — right now. That's because about half of all U.S. households today own at least one television, smartphone, tablet and laptop/desktop.

Collectively, these five consumer technology product categories have represented more than 40 percent of industry revenue since 2011 — and more than 50 percent in the past four years.

But the products we own and the ways we use them are changing.

According to the latest forecast from the Consumer Technology Association, the piece of the industry pie occupied by these product categories — TVs, smartphones, tablets, laptops and desktops — is shrinking as ownership rates peak and product life cycles lengthen.

And while their growth over the past decade has largely defined the consumer tech industry, their revenue growth is slowing — a shift that points to the future of consumer tech.

While only 63 percent of U.S. households own their own home, two-thirds own a smartphone, 9 out of 10 own a computer, and almost every one — 98 percent — owns a television. We spend almost 11 hours a day engaging with a screen in one form or another.

Our use of these devices is not only changing the ways we live and relate to one another, they are fundamentally changing our identity. Take smartphones, which have transformed not only how we communicate, but also how we commute (Uber and Lyft), choose restaurants (Yelp), grocery shop (Instacart), listen to music (Pandora) and connect with one another (Facebook).

The inflection point suggested by industry forecasts isn't just one of growth and decline, but a substantial change in how we infuse technology into our core existence. The list of original, innovative, digitally connected products is growing, thanks to emerging tech categories such as wearables, virtual and augmented reality, digital personal assistants and a slew of internet-connected objects showing up in smart-home technologies.

Next year will mark the first year the "Big Five" consumer tech products represent less than 50 percent of consumer technology industry revenue. But, to be clear, this isn't a sign of decline; rather, it's an indication of opportunity and growth and adoption as consumers turn to an increasingly broader array of digital devices to redefine how we live our lives.

The installed base for these large categories has spawned remarkably diverse innovation. For example, smartwatches are today primarily extensions of the smartphone. With that comes a massive period of experimentation, as we try to make sense of how we want to integrate these devices into our daily lives.

As new-use cases evolve, smartwatches will do much more than simply complement our smartphones. It's part of the reason we project continued smartwatch growth, with more than 12 million units sold in the U.S. this year.

Growth in stand-alone digital assistance devices such as Amazon's Echo ("Hi, Alexa!") or Google's forthcoming Home will build in the years to come. CTA projects more than 1 million digital assistant units will sell this year — about one-third more units than last year.

While the smartphone morphed into the hub for a number of connected devices, your voice is becoming the new interface as growing areas of tech integrate into these platforms.

Over the past two years, consumers are focusing more on monitoring and tracking the metrics of their daily activity levels. Today, 20 percent of households have an activity tracker, and our forecast predicts 60 percent growth in 2016.

The desire to measure data that is already there but not currently being captured is now beginning to emerge in other areas of our lives, too. For example, pet tech is expected to blossom into a $250 million segment by 2020 — and this category was essentially nonexistent just a few years ago.

Technology is constantly, continuously reinventing itself, cannibalizing its own growth before something else can. We are now entering the next phase of growth, as we transition from the stalwarts that grew consumer technology into a $287 billion industry in the U.S. to the emerging categories that will propel us forward.

We've spent the past 15 years replacing analog technology devices with their digital counterparts. We are now turning to an even bigger endeavor. We are beginning to adopt digital devices where no analog corollary existed.

Herein lies the great opportunity and challenge for consumer tech. Digitizing elements of our lives that thus far have been completely untouched by technology is a tremendous opportunity with diverse, real-world problems to solve.

To drive adoption within this emerging tech paradigm, consumers need to clearly see the value propositions and the use case scenarios. And this is just the start. In the decades to come, consumer tech, such as autonomous vehicles and virtual reality will push us even further along an innovation frontier.

The opportunity is thrilling. The challenge is real. And the potential disruption to how we define ourselves and live our lives will be phenomenal.

Shawn DuBravac is chief economist of the Consumer Technology Association and the author of Digital Destiny: How the New Age of Data Will Transform the Way We Live, Work, and Communicate. Follow him on Twitter @shawndubravac.

from the like-the-Coke-formula,-but-for-years-of-someone's-life dept

When law enforcement agencies want to know what people are up to, they no longer have to send officers out to walk a beat. It can all be done in-house, using as many data points as can be collected without a warrant. Multiple companies offer "pre-crime" databases for determining criminal activity "hot spots," which allow officers to make foregone conclusions based on what someone might do, rather than what they've actually done.

So much for "intervention." Having a list of people who have a higher risk of being shot doesn't mean much when all it's used for is confirming the database's hunches. However, these same databases are being put to use in a much more functional way: determining sentence lengths for the criminals who have been arrested.

When Eric L. Loomis was sentenced for eluding the police in La Crosse, Wis., the judge told him he presented a “high risk” to the community and handed down a six-year prison term.

The judge said he had arrived at his sentencing decision in part because of Mr. Loomis’s rating on the Compas assessment, a secret algorithm used in the Wisconsin justice system to calculate the likelihood that someone will commit another crime.

We're locking up more people for more years based on criminal activity they'll no longer have the option of possibly performing. This is nothing new. Sentencing enhancement is based on a lot of factors, not all of them confined to proprietary databases. But what is new are the algorithms used to determine these sentence enhancements, most of which belong to private companies who are completely uninterested in sharing this crucial part of the equation with the public.

In Mr. Loomis' case, the software determined he would be likely to engage in further criminal activity in the future. A so-called "Compas score" -- provided by Northpointe Inc. -- resulted in a six-year sentence for eluding an officer and operating a vehicle without the owner's consent. His lawyer is challenging this sentence enhancement and going after Northpointe, which refuses to release any information about how the Compas score is compiled.

What Northpointe has released are statements that confirm the code is proprietary and that the Compas score is "backed by research" -- although it is similarly unwilling to release this research.

The problem here isn't so much the use of algorithms to determine sentence lengths. After all, state and federal guidelines for sentence lengths are used all of the time during sentencing, which includes factors such as the likelihood of future criminal activity. But these guidelines can be viewed by the public and are much more easily challenged in court.

The use of private contractors to provide input on sentencing renders the process opaque. Defendants can't adequately challenge sentence enhancements without knowing the details of the "score" being presented by prosecutors to judges. The algorithms' inner workings should either be made available to defendants upon request, or the "score" should be determined solely by government agencies, where the data and determining factors can be inspected by the public.

We're now in the unfortunate situation where companies are telling judges how long someone should be locked up -- using data which itself might be highly questionable. The feeling seems to be that if enough data is gathered, good things will happen. But as we can see from Chicago's implementation of this technology, the only thing it's done so far is add confirmation bias toetags to the ever-increasing number of bodies in the city's morgues.

The use of locked-down, proprietary code in sentencing is more of the same. It undermines the government's assertion that prison sentences are a form of rehabilitation and replaces it with the promise that criminal defendants will "do the time" so they can't "do the crime" -- all the while preventing those affected from challenging this determination.

They are all worth looking at, but Techdirt readers will probably be particularly interested in one called "Foreign investor protections in the Trans-Pacific Partnership." It's by Gus Van Harten, a professor at Osgoode Hall Law School of York University in Toronto, Canada, and a well-known commentator on trade law and policy. The first part of his analysis provides a good summary of the world of corporate sovereignty, or investor-state dispute settlement (ISDS) as it is more formally known. The later section looks at some new research that provides additional insight into just how bad corporate sovereignty is for those of us who are not insanely rich.

For example, Van Harten quotes some recent work showing that 90% of ISDS fines against countries went to corporations with over $1 billion in annual revenue or to individuals with over $100 million in net wealth. Similarly, the success rate among the largest multinationals -- those with turnovers of at least $10 billion -- was 71% in the 48 cases they initiated, compared with a success rate for everyone else of 42%. So any claim that ISDS is equally useful to all companies, including small and medium-sized businesses, is not borne out by the facts.

Van Harten also mentions some interesting figures for the financial winners and losers across all known corporate sovereignty cases. The largest corporations ended up with gains of around $6 billion; the thriving ISDS legal industry took home $2 billion; very wealthy individuals received around $1 billion; and large companies picked up another $500 million. As for the countries that were sued by these groups, their losses totaled some $10 billion. That's an important reminder that nations cannot win ISDS cases: the best they can ever hope for is not to lose. And they often do lose, as the high cumulative fines indicate.

Another fascinating insight comes from looking at the percentage of foreign-owned assets (that is, inward foreign direct investment) in the US economy that are covered by ISDS in trade and investment agreements. Currently, it is only around 10%, which is probably why corporate sovereignty is not a big deal for the US public today. If TPP is ratified, another 10% of foreign investments will be covered. But if the TAFTA/TTIP deal with the EU goes through, it would add another 60% to the total -- a huge jump. That would mean that TPP and TTIP together would make nearly all foreign investments in the US subject to corporate sovereignty.

Van Harten highlights another key aspect of TPP that has not received much attention. He points out that TPP goes beyond the older North American Free Trade Agreement (NAFTA), which is between the US, Canada and Mexico, but does not solve its serious problems, despite claims to the contrary:

anything that is apparently better in the TPP compared to NAFTA will very likely be lost in practice because a U.S. investor can bring a claim under NAFTA instead of the TPP. Also, anything worse in the TPP would not be displaced by NAFTA because a foreign investor could choose to bring a claim under the TPP. If a foreign investor was unsure which agreement offered the best chance to win compensation, it could bring a claim under the TPP and NAFTA, making a different argument under each and getting compensation if it won under either.

In other words, TPP has been written in such a way that the public always gets the worst of both worlds. Van Harten's chilling summary of the corporate sovereignty provisions in TPP is worth quoting in full:

The TPP would take us in the wrong direction and be very difficult to reverse. It would expand the transfer of power to ISDS arbitrators from legislatures, governments, and courts. The arbitrators would not be accountable like a legislature. They would not be capable of regulating like a government. They would not be independent or fair like a court.

At the core of the TPP's threat to democracy and regulation is the uncertain and potentially huge price tag that its ISDS process would put on any law or regulation that is opposed by a large multinational company or a billionaire investor. The problem is not that foreign investors would be
too big to fail; it is that the TPP would make the biggest and richest ones too risky to regulate.

The TPP was an opportunity for countries to step back from and reform the flawed system of foreign investor rights and ISDS. Instead, the TPP would expand the system massively. That decision is reason enough to reject the TPP in order to protect the established institutions of democracy, sovereignty, and the rule of law in TPP countries.

Anyone who has any lingering illusions that it might be worth signing up to TPP should read this new analysis, which will dispel them rapidly.

from the urls-we-dig-up dept

Despite our supposed intelligence, humans don't actually know how our own brains work. But even in our ignorance, we're still developing algorithms and machines that might catch on to how we learn and think. Google's autonomous vehicle project has a pretty good driving record, except that the world is messy, and predicting how human drivers will react isn't always certain -- especially when they drive buses. Our relationship with robots is going to be more and more complex in the next few years. We'll need to recognize when robots are faulty, and that might get harder and harder to do.

from the lies,-damned-lies-and-statistics dept

Not too surprisingly, the Wall Street Journal has been a big booster of the Trans Pacific Partnership (TPP) agreement over the past year, repeatedly praising the deal and claiming it will save the world in all sorts of ways. Most of that is based on the faulty belief that the TPP is actually a "free trade" deal (it's actually the opposite), with some of it just being the standard WSJ faith-based belief that "if big businesses like it, it must be good."

Given that, it's a bit surprising that even the WSJ is now calling out the US Trade Rep (USTR) for its blatantly misleading propaganda about the TPP. As Glyn recently wrote about, the Peterson Institute for International Economics released a summary showing tiny economic gains from the TPP -- to the point that it makes you wonder what the fuss is. Some folks have already called into question the Peterson Institute's methodology, suggesting the results may be even worse, but even if we accept the organization's findings, the benefits to the TPP are miniscule: increasing GDP 0.5% by 2030.

From the way that chart is drawn, it sure looks like a really big gap between "with TPP" and "without TPP." But, of course, it's really just the difference between $25,754 billion and $25,885 billion. Yes, $131 billion is nothing to sneeze at, but on an economic projection 15 years out, that's a rounding error. But the chart, of course, makes it look like a big deal. Here's the notoriously TPP-supporting WSJ explaining how ridiculous the chart is:

Notice anything wrong here? Look at those two values on the right side of the column. With the Trans-Pacific Partnership, U.S. real national income will be $25,885 billion in 2030. Without, it will only be $25,754 billion. That’s a difference of $131 billion. But the chart presents that gap as about the same, in size, as the gap between $18,154 billion and $25,754 billion. That’s a difference of $7.6 trillion. Yep, that’s trillion with a “t.”

The WSJ then tried to help out with its own, more accurate chart:

But, of course, even that chart is somewhat misleading, since the y-axis is truncated (which the WSJ itself admits). So, to help out, we created our own chart based on Peterson's numbers (in Table 2, in case you're wondering):

Notice how you basically can't see the difference between the two lines. Yeah. Compare that to the USTR's gloating above. And people wonder why we call out the USTR for being a secretive, totally dishonest organization.

Amusingly, when the WSJ reached out to the USTR, the USTR pretended that its original chart was an "error" and promised an "updated" chart:

“We noticed the error and are tweeting out updated, corrected graphics now,” said Andrew Bates, press secretary for the Office of the USTR.

So, uh, yeah, its "corrected" graphic is even more misleading in that it just hides the base altogether and makes it look like this change is some huge change. Oh, and the original graphic, which the USTR admits is an "error"? That one is still up. Because of course it is.

from the another-reason-we-need-negotiating-texts-published-early dept

It's striking that from a situation where there were very few studies of the likely effects of the TPP agreement, we've moved to one where they are appearing almost every week. Recently Techdirt wrote about a World Bank study, and one from Tufts University; now we have one from the Peterson Institute for International Economics, which calls itself "a private, nonprofit, nonpartisan research institution devoted to the study of international economic policy." Here's its summary of the results:

The new estimates suggest that the TPP will increase annual real incomes in the United States by $131 billion, or 0.5 percent of GDP, and annual exports by $357 billion, or 9.1 percent of exports, over baseline projections by 2030, when the agreement is nearly fully implemented. Annual income gains by 2030 will be $492 billion for the world. While the United States will be the largest beneficiary of the TPP in absolute terms, the agreement will generate substantial gains for Japan, Malaysia, and Vietnam as well, and solid benefits for other members. The agreement will raise US wages but is not projected to change US employment levels; it will slightly increase "job churn" (movements of jobs between firms) and impose adjustment costs on some workers.

That figure of 0.5% cumulative GDP gain by 2030 is in line with the other studies discussed previously here on Techdirt. But there are various issues with both that figure and the study itself, which are highlighted by Dean Baker, co-director of the Center for Economic and Policy Research, in a post on Medium. One of the most serious is something we've noted before: despite attempts to present them as otherwise, the predicted gains are extremely small. Baker explains this well:

The study's projection of a cumulative gain to GDP of 0.5 percent by 2030 implies an increase in the annual growth rate of 0.036 percentage points. This means that if the economy was projected to grow by 2.2 percent a year in a baseline scenario, it will instead grow at a 2.236 percent rate with the TPP, assuming the Peterson Institute projections prove correct.

The projections imply that, as a result of the TPP, the country will be as rich on January 1, 2030 as it would otherwise be on April 1, 2030.

Then there's the matter of the econometric modelling technique adopted. The Computable General Equilibrium (CGE) analysis employed by the Peterson Institute makes some very big assumptions:

The model assumes that the TPP will affect neither total employment nor the national savings (or equivalently trade balances) of countries. This "macroeconomic closure" assumption allows modern trade models to focus on the goals of trade policy -- namely sustained productivity and wage increases through changes in trade patterns and industry output levels. With minor variations, the assumption is used in most applied models of trade agreements.

That means -- by definition -- these CGE models can tell us nothing about the effects of TPP on employment, and assume that no jobs are lost or gained overall. Baker points out another major consequence of this approach:

by design the model assumes that trade balance for the United States is not changed as a result of the TPP. This means that whatever changes we see in exports, according to the model, will be matched by an equal change in imports.

As a result, the predicted boost of $357 billion to US exports thanks to TPP is matched by a balancing boost of $357 billion to imports as well. Baker also offers an explanation of why the CGE model makes its rather surprising view on employment:

In prior decades most economists were comfortable with this sort of full employment assumption since it was widely believed that economies quickly bounced back from recessions or periods of less than full employment. In this view, if a trade agreement led to a larger trade deficit it would soon be offset by lower interest rates, which would provide a boost to investment and consumption.

However:

in the wake of the 2008 crash, fewer economists now believe that the economy has a natural tendency back to full employment. Many of the world's most prominent economists (e.g. Larry Summers, Paul Krugman, Olivier Blanchard) now accept the idea of "secular stagnation." This means that economies really can suffer from long periods of inadequate demand.

That risk is one key reason why the lack of currency controls in TPP is a big problem:

if one or more of the countries in the TPP began running larger trade surpluses with the United States, and then bought up large amounts of dollars to prevent an adjustment of their currency, there is nothing the United States could do within the terms of the agreement.

[The writers in the expert group] found that the standard of documentation of the modelling is dreadfully inadequate -- just 20 pages of text in the published report. The authors [of the New Zealand government report] should have chosen, or been asked to present, a much weightier and more detailed account of every facet of the data, assumptions, modelling and results.

Not only is the methodology poorly explained, but the results are underwhelming too. The official predictions of economic gains for New Zealand are summarized as follows by the team of economists:

The government has used modelling to derive estimates of the economic benefit for New Zealand and estimated an increase in real GDP of 0.9% by 2030 or $2.7 billion annually.
The increase is modest. A continuation of currently forecast levels of growth would mean that NZ GDP would be 47% higher by 2030 without TPPA, versus 47.9% with TPPA.

The expert group are even more scathing about the way in which the supposed benefits of removing "non-tariff barriers" (NTBs) have been included:

The government's analysis estimated that reducing NTBs would account for $1.7 billion of the $2.7 billion estimate for gains from the TPPA. The modelling is not specific about the types of NTBs that exist amongst the TPPA countries, aside from the definition that they are 'measures that are discriminatory and are for the purposes of restricting trade'. There is no adequate explanation about which countries maintain these barriers, how they are distinguished from legitimate NonTariff Measures (that are not for the purposes of restricting trade), what proportion of NTBs would be removed, what provisions in the TPPA would remove them or what the risks would be to societies as a result of their removal.

That lack of specificity is a serious problem, because most of the gains from TPP are supposed to come from removing NTBs. Without the details, there's no way of knowing how plausible the assumptions are. In any case, as the economists go on to note rather acidly:

This approach implies that societies maintaining higher levels of protection for social, environmental and health reasons, and a more developed system of business regulation, will generate benefits by removing their regulations. This may be a view held by some neoliberal economists but it is not the view of many other economists, and not supported by evidence.

The appearance of these new studies, together with those that were published before, underlines the fact that, whatever the source, it seems impossible to find any compelling economic justification for signing up to the agreement, since the gains are so pitiful -- and that's without including possible costs, which are never discussed. That this is only now becoming incontrovertible, in the wake of the publication of the TPP text last year, also shows why all the key documents should have been released as they were written in order to allow this kind of in-depth analysis to be conducted and debated as the talks proceeded. Not, as is happening currently, just a few days before the official signing ceremony on February 4 when it's a bit late to do much about it.

from the accelerating-the-global-race-to-the-bottom dept

Last week we wrote about a World Bank report that predicted that TPP would produce negligible boosts to the economies of the US, Australia and Canada. Of course, that's just one study, and it could be argued that it might be unrepresentative, or unduly pessimistic. That makes the publication of yet more econometric modelling of what could happen particularly welcome. It comes from Jerome Capaldo and Alex Izurieta at Tufts University, and starts off by making an important point that is too often overlooked when considering other TPP predictions:

The standard model assumes full employment and invariant income distribution, ruling out the main risks of trade and financial liberalization. Subject to these assumptions, it finds positive effects on growth. An important question, therefore, is how this conclusion changes if those assumptions are dropped.

Assuming that TPP won't change employment levels in any of the participating nations seems a stretch, not least because previous trade liberalization has caused sizable job losses, as the new study notes. At the very least, it means that those using these models to argue in favor of TPP shouldn't be making any claims about its effects on employment, since these don't exist by definition. Capaldo and Izurieta are able to look at how jobs are affected because they use a different model, which they claim is superior to the one found in most other studies:

In this paper, we review existing projections of the TPP and propose alternative ones based on more realistic assumptions about economic adjustment and income distribution. We start from the trade projections put forward in the main existing study and explore their macroeconomic consequences using the United Nations Global Policy Model.

Most of the paper is spent taking a rather critical look at previous results, and will probably be mostly of interest to economists, especially academic ones. But the final results of the new calculation are certainly worth noting:

Given the small changes in net exports, the resulting changes in GDP growth are mostly projected to be negligible. We present two sets of growth figures: ten-year totals, which measure the overall effect of the TPP on growth rates compared to the baseline, and annual averages, which measure the average changes in growth rates due to the TPP.

That underlines another point often missed: that the GDP growth figures quoted by politicians and TPP supporters reflect the overall effect after ten years. Here's what Capaldo and Izurieta found:

Total ten-year changes in growth rates are projected to be below one percent, by 2025, in all regions but two. In East Asia and Latin America, GDP growth is projected to increase by 2.18 percent and 2.84 percent respectively under the TPP. By comparison, during 2005-2015, GDP in the two regions is estimated to have grown by 50 percent and 47 percent respectively.

The US and Japan are projected to suffer net losses of GDP of 0.54 percent and 0.12 percent respectively compared to the baseline

Although those growth figures are worse than previous predictions, they confirm that TPP's impact on GDPs will be small. What's new in this paper is an estimation of the agreement's effect on jobs:

While projected employment losses are small compared to the labor force, they clearly signal an adverse effect of liberalization not taken into account in full-employment models. In TPP countries, the largest effect will occur in the US, with approximately 450,000 jobs lost by 2025. Japan and Canada follow, with approximately 75,000 and 58,000 jobs lost respectively. The smallest loss -- approximately 5,000 jobs -- is projected to occur in New Zealand, where the increase in net exports is projected to be the largest. Overall, projected job losses in TPP countries amount to 771,000 jobs.

Also novel is the report's comments about the global effects of TPP:

when analyzed with a model that recognizes the risks of trade liberalization, the TPP appears to only marginally change competitiveness among participating countries. Most gains are therefore obtained at the expense of non-TPP countries.

Globally, the TPP favors competition on labor costs and remuneration of capital. Depending on the policy choices in non-TPP countries, this may accelerate the global race to the bottom, increasing downward pressure on labor incomes in a quest for ever more elusive trade gains.

Although this is just one (more) study, it does seem to confirm the more gloomy predictions for TPP. It inevitably poses a key question with yet more force: why exactly are politicians in TPP nations pushing so hard to ratify a controversial agreement that seems have few quantifiable benefits, and very considerable costs?